Blanch Corporation has been using the dollar-value LIFO inventory method for 20 years. The company maintains one inventory pool that includes raw materials, goods in process, and finished goods. The LIFO deferral is several million dollars. At the end of the current year, the corporations inventory of finished goods was almost depleted because the companys major competitor had to recall a substantial portion of its products. Blanchs management is aware that if the inventory is not replenished, the corporation will be required to recognize income that has been deferred for the past 20 years. The controller has suggested that the company buy sufficient raw materials to substitute for the depleted finished goods. This will require having on hand at the end of the year the raw materials required for the next 18 months, when ordinarily the company has only a three-month supply on hand. The controller argues that the cost of carrying the additional inventory is much less than the additional taxes that will be due if the inventories are allowed to decrease.

The operations manager has suggested that the company buy the raw materials before the end of the year and have the supplier store the materials. Furthermore, the supplier would act a Blanchs agent to sell the excess materials. This would minimize the actual investment in inventory. Do you think the corporation should follow either proposal? Justify your answer.